Crown Crafts Posts Slow Quarter

James Mammarella, November 26, 2007

Infant and toddler products supplier Crown Crafts, Inc. recorded one-tenth as much profit in this year's second quarter than it did one year ago, but the company has scarcely begun to take ownership of its new asset, the former Springs Global infant and toddler home textiles business.

Crown Crafts reported net income for the second quarter ended Sept. 30 of $541,000, or $0.05 per diluted share, on net sales of $17.1 million, compared to year-ago net income of $5.4 million, or $0.54 per diluted share, on net sales of $20.9 million.

Chairman, president and ceo Randall Chestnut said downside factors included "decreased replenishment orders, promotions in the prior year not repeated in the current year, and lost sales related to vinyl bibs. In addition, net income was suppressed by costs associated with the company's proxy contest, increased costs related to stock compensation and a charge related to vinyl bibs."

In response to a question by HTT during the earnings call, Chestnut said that the infant business acquired from Springs includes such key licenses as the Disney agreements for character brands and for motion pictures such as "Cars," and the Fisher-Price brand license for infants that has been experiencing solid growth. Retailer relationships for such properties range from major discount chains to the mid-tier, and with Toys "R" Us and Babies "R" Us in the specialty channel.

The Springs business, said Chestnut, is expected to add $25 million in sales to Crown Crafts on an annual basis.

Net income for the six months year to date was $1.5 million on net sales of $32.5 million, compared to the year-ago gain of $6.3 on sales of $36.7 million.

Beside the costs of its proxy battle over the summer and the voluntary recall of vinyl bibs (even though the products met or exceeded federal consumer product safety standards), Crown Crafts also saw sales trimmed due to the discontinued impact of the Churchill Weavers division, which it sold earlier this year.

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